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Methode Electronics (MEI) Q4 Earnings Meet Mark, Sales Down Y/Y

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Methode Electronics (MEI - Free Report) reported fourth-quarter fiscal 2022 earnings of 43 cents per share, which was in line with the Zacks Consensus Estimate but declined 47% year over year.

Net sales declined 4.1% year over year to $288.7 million. The figure lagged the Zacks Consensus Estimate of $289 million.

The year-over-year decline was primarily attributed to lower sales volumes in the Automotive segment, mostly due to demand weakness in North America and Europe. Supply chain constraints hurt sales in North America while weaker activity in Europe was due to the conflict in Ukraine. Lockdowns in China also affected net sales.

Quarter Details

Automotive net sales decreased 4.9% year over year to $194.3 million.

Industrial net sales declined 3.2% year over year to $78.9 million. The decrease was primarily due to lower sales in power distribution, partially offset by higher sales of radio remote controls.
 

 

Interface net sales declined 2.1% year over year to $14.2 million. Medical net sales increased $0.9 million year over year to $1.6 million.

Gross margin contracted 610 basis points (bps) year over year to 19%.

Adjusted EBITDA margin contracted 620 bps on a year-over-year basis to 10.7%.

Operating expenses declined 3.8% year over year to $40.3 million. Selling, general and administrative (SG&A) expenses declined 4% year over year to $35.6 million.

As percentage of revenues, operating expenses remain unchanged on a year-over-year basis at 14%. SG&A was unchanged at 12.3%.

Operating income declined 56.7% year over year to $14.6 million. The year-over-year decrease was primarily due to lower sales, and higher material and freight costs as a result of supply chain issues, and product mix.

Operating margin contracted 610 bps to 5.1%.

Balance Sheet & Cash Flow

As of Apr 30, 2022, cash and cash equivalents were $172 million.

Debt was $210.5 million at the end of the quarter. Net debt, defined as debt-less cash and cash equivalents, were $38.5 million.

Moreover, free cash flow was $60.8 million.

Guidance

For fiscal 2023, Methode Electronics expects sales between $1.16 billion and $1.21 billion. Earnings are expected in the range of $2.70-$3.10 per share.

Methode Electronics also announced its three-year organic sales' compounded annual growth rate target of 6%.

Zacks Rank & Stocks to Consider

Methode Electronics currently carries a Zacks Rank #5 (Strong Sell).

The stock has outperformed the broader Zacks Computer & Technology sector on a year-to-date basis. While Methode Electronics’ shares lost 24.7% year to date, the sector fell 30.8%.

Some better-ranked stocks in the same sector include Analog Devices (ADI - Free Report) , Avnet (AVT - Free Report) and Aspen Technology (AZPN - Free Report) . All the three stocks sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Shares of Aspen and Avnet have returned 25.7% and 0.6%, respectively, on a year-to-date basis.

Analog Devices’ shares lost 17.2% over the same time frame.